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United Kingdom OECD Economic survey addressing Brexit and weak productivity
The OECD Economic Survey of the United Kingdom document makes several key points: 1) GDP growth in the UK has slowed, productivity is stagnant, and inflation has reduced real incomes. However, unemployment is at a 42-year low. 2) Regional productivity gaps exist within the UK, with London being significantly more productive than other areas. Lagging regions rely more on EU funds and have lower skills. 3) Many UK adults and youth have only basic skills. Participation in vocational education is low. Most workers on zero-hours contracts and in low-paid self-employment have low skills. The document recommends policies to address Brexit challenges, boost regional productivity, and raise skills,
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United Kingdom OECD Economic survey addressing Brexit and weak productivity
- 1. 2017 OECD ECONOMICSURVEY OF THE UNITED KINGDOM Addressing Brexit and weak productivity October 17th 2017, London http://www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm @OECDeconomy @OECD
- 2. GDP growth hasslowed 1 Source: OECD Economic Outlook: Statistics and Projections Database.
- 3. Valuations of UK-orientedfirms are lower 2 Source: Thomson Reuters Datastream.
- 4. Net migration hasbeen falling since mid-2016 3 Source: Office for National Statistics.
- 5. 4 Labour productivity isat a standstill Note: PPP: purchasing power parities. Source: OECD Productivity Statistics Database.
- 6. Unemployment rate isat a 42-year low 5 Source: OECD Economic Outlook: Statistics and Projections Database.
- 7. 6 Job creation hasbecome more diversified Source: Office for National Statistics.
- 8. 7 Higher inflation hasreduced real incomes Source: Office for National Statistics.
- 9. 8 Households smooth theirconsumption Source: Office for National Statistics and Bank of England.
- 10. Sterling’s fall maynot restore competitiveness 9 Note: Export performance is the ratio of export volumes to export markets for total goods and services. Source: OECD Economic Outlook: Statistics and Projections Database.
- 11. 10 Monetary stimulus hasincreased fiscal space Note: The Asset Purchase Facility (APF) was set up for the Bank of England (BoE) to carry out quantitative easing. Source: House of Commons Library.
- 12. 11 Average maturity ofpublic debt is high Source: OECD Sovereign Borrowing Outlook 2017.
- 13. 12 Taxes paid varyby job type Note: NICs: National Insurance contributions. Source: Office for Budget Responsibility.
- 14. 13 Maintain theclosest possible economic relationship with the European Union after Brexit. Identify productivity-enhancing fiscal initiatives on investment that could be implemented swiftly, should growth falter. Perform a tax and spending review to allow for additional fiscal initiatives, including: Raise National Insurance contributions for the self-employed; Index the state pension on average earnings only. Introduce debt-to-income ratios for borrowers depending on exposure to shocks to safeguard financial stability. Key macroeconomic recommendations
- 15.
- 16. North-South divide inregional productivity 15Source: Office for National Statistics. Gross value added per hour
- 17. Productivity of theaverage city is low 16Source: OECD Regional Statistics Database.
- 18. 17 London’s productivity ishigh across sectors Source: Office for National Statistics.
- 19. High infrastructure spendingprevails in London, supported by Transport for London 18 Source: HM Treasury.
- 20. 19 Lagging regions relymore on EU funds Source: Sheffield Political Economy Research Unit and Office for National Statistics.
- 21. Skills are lowerin less productive regions 20Source: OECD Regional Statistics Database and Office for National Statistics.
- 22. Decentralisation is comparativelylow 21 Source: OECD Regional Statistics Database.
- 23. 22 Use theindustrial strategy to develop integrated policy packages based on current and emerging regional strengths. Invest in improving inter- and intra-city transport links to foster agglomeration effects. Continue decentralisation by reaching deals with all city-regions and grant local authorities more revenues from local taxes. Continue to increase direct and indirect support for private and public R&D, and business-university collaborations. Adapt technical education to local business needs. Raise training and other incentives to reduce teacher shortages in disadvantaged areas and/or regions. Key recommendations on regional productivity
- 24. 23 Raising Low-Skilled Productivityand Job Quality
- 25. 24 Many adults haveonly basic skills Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.
- 26. 25 Similar shares oflow-skilled youth and elderly Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.
- 27. 26 Investing in earlychildhood education is key Source: OECD (2017), Education at a Glance 2017: OECD Indicators.
- 28. 27 Skills are lowat all education levels Source: Calculations based on the PIAAC database.
- 29. 28 Many students exiteducation relatively early Source: OECD (2016), Education at a Glance 2017: OECD Indicators.
- 30. 29 Participation in vocationaleducation is low Source: OECD (2014), "Skills Beyond School: Synthesis Report", OECD Reviews of Vocational Education and Training.
- 31. 30 Mainly low skilledare on zero-hours contracts Note: Zero-hours contracts refer to labour contracts which do not guarantee any hours in a given week. Source: Office for National Statistics.
- 32. 31 Minimum wage isbeing raised to a high level Source: Eurostat.
- 33. 32 Self-employment could beused to bypass minimum wage regulations Source: Office for National Statistics and Eurostat.
- 34. 33 Prioritise fundingto training and skills development of childcare staff. Use existing flexibility in reaching the National Living Wage 2020 target in case of negative economic shocks Grant workers on zero-hour contracts enhanced job security rights after three months. Introduce tighter criteria to restrict self-employment to truly independent entrepreneurs. Introduce individually targeted programmes to improve lifelong learning opportunities. Increase financing and continue to promote the effectiveness of active labour market policies. Key recommendations on low-skilled productivity and job quality
- 35. For more information Disclaimers: Thestatistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 34 @OECDeconomy @OECD http://www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm
Editor's Notes
- #19 Higher productivity: For both Latvian and Estonian firms, higher productivity level significantly increases the likelihood that firms enter export. This is true for all types of exports. Foreign capital: For both Latvian and Estonian firms, firms with a higher foreign capital share are more likely to enter export markets. These firms can be participating in the supply chains operated by MNEs or enjoy transfer of knowledge in foreign markets. Larger size: Larger firms are significantly more likely to enter exports, even after incorporating the fact that more productive firms are larger. However, the probability of export entry decreases after firms reach a certain size. Younger age: Younger firms are more likely to start exporting in both Latvia and Estonia, although this is not true for very young firms. Higher capital intensity: Firms with higher capital-labour ratio are more likely to start exporting. Good access to credit: Firms with higher liquidity ratio is more likely to start exporting in Estonia, while this is the opposite in Latvia. One possible interpretation is that Latvian firms are subject to credit constraints and therefore need to use internal cash flow to finance the upfront costs of export entry. Hiring of skilled workers: Hiring managers or employees who previously worked for MNEs or exporting firms increases significantly the probability of Estonian firms to start exporting (Masso et al., 2015; Masso and Vahter, 2016). Hiring of ex-employees of exporting firms also increases the likelihood of export entry by Latvian firms. This underscores the importance of skilled workers in GVC participation. It is also in line with research that highlights the mobility of skilled workers as a key channel of knowledge spillovers (Dasgupta 2012).